U.S. Stocks Advance on Earnings While Yen Strengthens
Stocks advanced, sending the Standard & Poor’s 500 Index up for a fifth day, as insurance and commodity shares led gains amid better-than-forecast earnings. Commodities rose, while the yen gained as the Bank of Japan (8301) planned to wait a year to begin open-ended asset purchases.
The S&P 500 (SPX) added 0.4 percent to 1,492.51 as of 4 p.m. in New York, closing at the best level since December 2007. Japan’s currency climbed 1 percent to 88.74 per dollar, climbing from near the weakest level since 2010. The S&P GSCI gauge of 24 commodities jumped to a three-month high as industrial metals led gains. Ten-year Treasury yields were little changed at 1.84 percent, while the Dollar Index slipped 0.2 percent.
Travelers Cos. and Freeport-McMoRan Copper & Gold Inc. helped lead gains in stocks after reporting earnings that topped analysts’ estimates. The yen, which lost about 10 percent against the dollar in the past three months, strengthened as the BOJ pledged to buy about 13 trillion yen ($145 billion) in assets a month from January 2014 and doubled its inflation target without setting a deadline.
“People’s worst fears are not coming to fruition,” said Dan Veru, who helps oversee $3.8 billion at Palisade Capital Management in Fort Lee, New Jersey. “If confidence improves in U.S. equities and we start seeing real money flows into U.S. equity market funds, this market’s going a lot higher.”
The Dow Jones Transportation Average and the Russell 2000 Index of smaller U.S. companies both rose to records today.
Travelers climbed more than 2.1 percent to help lead gains in the Dow Jones Industrial Average (INDU) today after the insurer beat estimates on higher income from its investment portfolio, increased sales and a benefit from reserves. Freeport-McMoRan jumped 4.6 percent, the most since September, after results that showed copper sales increased more than expected and costs fell.
DuPont Co., the biggest U.S. chemical maker by market value, gained 1.8 percent after earnings beat estimates as demand climbed for plastics used in autos.
An S&P gauge of homebuilders rose 0.3 percent, recovering from an earlier 1.3 percent retreat. Sales of existing homes unexpectedly fell 1 percent to a 4.94 million annual rate last month, figures from the National Association of Realtors showed. The reading was still the second-highest since November 2009. The median forecast of 79 economists surveyed by Bloomberg called for sales to increase to a 5.1 million rate.
“The home sales is definitely an important piece of news for the market,” said Robert Stimpson, a money manager at Oak Associates in Akron, Ohio, which manages $800 million. “The recovering housing market provides a lot of tertiary benefits for the economy and I believe that’s what supported the market last year in 2012. We want to see those improvements continue.”
The S&P 500 rose last week to its highest level since 2007 as earnings from companies including General Electric Co. and Goldman Sachs Group Inc. beat estimates. Seventeen members of the index were reporting today. Per-share profit has topped estimates at 73 percent of the 74 companies in the S&P 500 that reported quarterly earnings so far, according to data compiled by Bloomberg. The index is trading for about 14.8 times its companies reported earnings, compared with an average multiple of about 16.6 since 1954.
International Business Machines Corp. and Google Inc. climbed in extended trading after reporting better-than- estimated results following the close of exchanges.
‘Explosion of Greatness’
David Tepper, the hedge-fund manager who runs the $15 billion Appaloosa Management LP, said he’s bullish on U.S. stocks as the economy is set to grow by as much as 3 percent this year.
“This country is on the verge of an explosion of greatness,” Tepper said today in an interview with Stephanie Ruhle on Bloomberg Television’s “Market Makers.” “The key is to be long equities this year.”
Tepper said investors should own stocks because they’re historically inexpensive, U.S. companies have little debt, interest rates are low, credit is fully valued and the major risks to the global economy, such as a debt crisis in Europe, have diminished. Appaloosa, which celebrates its 20th anniversary this year, returned 30 percent in 2012, he said.
International investors are the most bullish on stocks in at least 3 1/2 years, with close to two-thirds planning to raise their holdings of equities during the next six months, according to a Bloomberg survey. As the global financial and business elite gather in Davos for their annual forum, 53 percent of respondents to the Bloomberg Global Poll also say equities will offer the highest return in the next year.
The Stoxx Europe 600 Index (SXXP) erased an earlier decline of as much as 0.8 percent to close little changed after a report showed German investor confidence climbed to a 2 1/2-year high.
Three shares fell for every two that gained in the Stoxx 600. Deutsche Bank AG, Germany’s biggest lender, slid 1.9 percent as Boersenzeitung reported that German financial watchdog Bafin asked two banks to simulate a split, citing unidentified people. Christian Streckert, a spokesman for Deutsche Bank, declined to comment.
Vivendi SA retreated 4 percent, the most since August, after the chief executive officer of its SFR phone unit predicted a difficult market for as long as 18 months. Banca Monte dei Paschi di Siena SpA slid 5.7 percent after a report said it used derivatives that are hurting profit.
The yen advanced against all 16 major peers, climbing as much as 1.4 percent versus the dollar. The central bank said today its asset purchases will include about 2 trillion yen in Japanese government bonds and about 10 trillion yen in treasury bills.
“The expectations were so extreme that the BOJ couldn’t meet them, and now we are currently seeing the disappointment and the retracement of those expectations,” said Carolin Hecht, a Frankfurt-based strategist at Commerzbank AG. “In general, the dollar-yen still has a long way to go up” and the Japanese currency may weaken to 96 yen by year-end, she said.
Japan’s currency slumped about 12 percent against the euro in the last three months on speculation the BOJ, under pressure from new Prime Minister Shinzo Abe, would increase monetary stimulus to lift the economy out of its third recession in five years. The Nikkei 225 Index (NKY) of Japanese stocks jumped 19 percent in that time.
The GSCI gauge of commodities rose as much as 0.7 percent to the highest since Oct. 19 as cotton, soybeans, aluminum, gasoline, lead and zinc rallied more than 1 percent. U.S. natural gas added as much as 2.2 percent on speculation that frigid weather now and in February will boost demand for the heating fuel. Oil climbed 0.7 percent to $96.24 a barrel, the highest settlement since Sept. 17.
The MSCI Emerging Markets Index (MXEF) increased 0.2 percent. Russia’s Micex closed down 0.8 percent and India’s Sensex slipped 0.6 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong gained 0.6 percent.
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